AASHTO also touts "China model" but fails to understand it - the Highway Petes have it all wrong (EDITORIAL)

June 25, 2008
By Peter Samuel

The example-de-jour among the Washington highway lobbyists is the "China model." The Chinese are spending big on highways and we need to too, is the gist of their message.

We've previously noted how ARTBA the roadbuilders lobby cite the impressive Chinese performance in building new highways, yet fail to understand that it is rooted in decentralized toll financing and private sector concessions, not the multi-government tax-&-grant megaprograms and six year central government plans that they lobby for.

But AASHTO, the state highway officials lobby is just as perverse. Their chairman Pete Rahn is quoted recently: "Testifying before a House Congressional committee, Rahn laid out the funding crisis, encouraging Congress to take action to dramatically improve the nation's transportation system.

"We have grossly under funded both our state and federal transportation systems over the last three decades," Rahn said. "If we continue this downward spiral, we risk losing our status as a global leader, as well as precious lives.

"To put it simply, we must pony up now to remain globally competitive or we will end up with a second-rate transportation system and a much less mobile society than we have today. China has seen the light and can be looked to as a model for investing in transportation." End quote from press release.

Both the Highway Petes (ARTBA's Pete Ruane as well as AASHTO's Pete Rahn) cite China as spending $363b on highways last year versus $87b of the US last year. They also cite India as building more than the US.

They want the Congress to "pony up" more money. That pony up is jolly lobbyist language for having the federal government increase fuel taxes to expand the present grant system for road construction. It implies that it is up to the US Congress to "fund" a much enlarged highway program. "Funding" means diverting money from other government programs, incurring more federal debt or imposing higher taxes on motorists to generate more funds for the Congress's grant programs and their earmarking.

But the "China model" in China doesn't depend on any giant ChinaTEA law and there is no elephantine IndiaTEA program in those Asian countries of massive earmarked central government taxes and grants filtered down through scores of state and metro bureaucracies and laundered through tens of thousands of politicians' dealings with campaign supporters.

China and India have healthy road building activity precisely because they don't have huge central government highway funding programs and hand-downs from Beijing to the provinces and Delhi to the states.

In those countries local communities know if they want the economic development and quality of life benefits of modern highways there's only one way to get it - tap the capital markets based on the prospective revenue stream of tolls, and get investors to join you in toll concessions. There is mixed funding but the initiative is at the state and regional level, and the highway program depends mainly on road use fees - on tolls - collected by roadbuilders and operators. Investors are enlisted to provide most of the capital for construction. See the Sichuan Expressway share issue notice nearby.

This is the China/India model we should be emulating.

We could do it with more sophisticated pricing/tolling technologies than they are using - fully cashless open road tolling, satellite based systems, and the like. We can build smarter roads than they can. We can manage traffic better. We can make our roads safer and environmentally superior to theirs.

But first we have to break out of the tax-&-grant and hand down straitjacket. We need a bold policy change which says that there will be no more US Government grants for new road construction. Henceforth - we need the federal government to say- all capacity expansion must be self-financed at the state, regional and local levels with tolls/road pricing.

Gas tax funds could be allocated for maintenance only, state by state and strictly on the basis of receipts, or the gas tax power ceded to states and localities. We'd be better off even if the gas tax was disconnected from road finance and made a general revenue source.

Roads are too important to be monkeyed around with and skimmed by scoundrels and snake-oil merchants on Capitol Hill from Alaska or the Appalachians.

The greatest stimulus we could give to transportation would be to do away with the hand down grant programs which everywhere in the US serve to discourage the self-financing of roads.

OK, the feds may have residual a role in research and dissemination of best-practices.

Funding of a few special defense or trade links would be harmless enough.

The federal tax-&-grant and hand down financing model is itself our central transportation funding problem. Its enlargement as urged by the Highway Petes would increase the waste and distortion. Worst of all it would provide an additional damper on the local initiative and self-financing of roads that the Asian tigers are so effectively harnessing.

Maybe the Barack Obama or John McCain campaign will pick up on this as a change we can believe in.

[AASHTO we notice in their logo call themselves "The Voice of Transportation". The voice? There aren't other voices?]

TOLLROADSnews 2008-06-25


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